DC Bar Doesn’t Like Whistleblowers and Neither Does the Court of Appeals for the Fifth Circuit

A prominent attorney to whistle-blowers was admonished by a Washington disciplinary panel Aug. 30 for helping a fired General Electric in-house attorney leak damaging information about GE to law enforcement officials and journalists (In re Koeck, D.C. Ct. App. Bd. on Prof’l Responsibility, No. 14-BD-061, 8/30/16).

The admonition—issued by the District of Columbia Board of Professional Responsibility and directed at against plaintiffs’ lawyer Lynne Bernabei—could bring an end to a trio of consolidated discipline cases that has drawn the ire of the D.C. whistle-blower bar.

The proceedings arose out of Bernabei’s representation of Adriana Koeck, who was also a respondent in this case. The ethics charges against Bernabei, Koeck, and a third lawyer—Notre Dame Law Professor G. Robert Blakey—were tied to events that occurred after GE fired Koeck in 2006.

Koeck downloaded confidential GE documents that she used to support a whistle-blower retaliation claim against the company under the Sarbanes-Oxley Act (SOX). The documents purportedly showed that GE had engaged in tax fraud and fired Koeck for raising internal concerns about that activity.

Bernabei and Blakey allegedly advised Koeck to leak the GE documents to the New York Times and Washington Post as part of a “press strategy” during the whistle-blower litigation. Koeck also leaked those documents to the Securities and Exchange Commission, to federal prosecutors, and to Brazilian law enforcement.

The Office of Disciplinary Counsel brought charges against all three lawyers in 2013. The complaint accused Koeck of breaching her duty of confidentiality to GE, and it alleged that Bernabei and Blakey knowingly assisted those violations.

The ODC also accused Bernabei of engaging in conduct prejudicial to the administration of justice, in violation of D.C. Rule of Professional Conduct 8.4(d), by threatening to disclose the internal GE documents “to the press” if GE “refused to engage in mediation.”

The board found that Koeck breached her duty of confidentiality and that Bernabei assisted her in doing so. (The board did not address the charges against Blakey because he accepted an informal admonition in 2015).

The board did not, however, sustain the Rule 8.4(d) charge against Bernabei.

The District of Columbia Court of Appeals can review decisions from the BPR. But that will depend on whether the ODC pursues an appeal, as Bernabei indicated that that she would accept an admonition and Koeck did not participate in the BPR proceedings.

The ODC’s chief, Disciplinary Counsel Hamilton P. Fox III, told Bloomberg BNA that he has not yet determined whether to appeal.
Whistle-Blower Lawyers Under Attack?

Tom Devine, Legal Director of the Government Accountability Project, said the ODC’s decision to pursue disciplinary charges against Bernabei and Koeck was “an outrageous abuse of power by a rogue [bar] prosecutor” who is “asserting the authority to trump” statutory protections in the Sarbanes-Oxley Act.

Devine told Bloomberg BNA that by bringing these cases, the ODC was also helping the corporate defense bar “engag[e] in an aggressive attack on whistle-blower rights lawyers.”

“It’s almost as if there isn’t just retaliation against whistle-blowers but against lawyers who represent them,” Devine said. “Corporations have been claiming that whenever whistle-blowers present evidence of corporate fraud, that evidence is stolen property that belonged to the company, and the lawyers were co-conspirators in this theft of corporate property,” Devine said.

“When I go to CLE programs, there are corporate employment lawyers who are warning the whistle-blower lawyers, saying, ‘We’re going to hold you accountable for helping people steal our client’s property,’” Devine said.

But in an interview with Bloomberg BNA, Fox said these disciplinary cases were brought to vindicate the importance of the ethics rules protecting client confidentiality.

“It’s fundamental to the operation of the attorney-client relationship that clients be assured their communications with their lawyers will be kept confidential,” Fox said.

“Clients can’t get good advice from their lawyers unless they know they can communicate with [them] in confidence,” Fox said. “And if they think their lawyer is going to go to the authorities and report them, they’re not going to communicate the facts they need to communicate, and they’re not going to get the kind of advice they need.”
SOX vs. Ethics Rules

The Government Accountability Project and the National Employment Lawyers Association filed an amicus brief on behalf of Koeck and Bernabei.

That brief argued that Sarbanes-Oxley protected the disclosures of GE documents that triggered these ethics complaints—and that any “conflicting state law,” including the D.C. Rules of Professional Conduct, are preempted by the federal law to the extent that they conflict with it.

“Congress unanimously legislated that attorneys not only have the right but the duty to blow the whistle on corporate fraud that could threaten shareholders’ investments,” Devine told Bloomberg BNA.

“That is the law of the land,” Devine added. “My question to Mr. Fox is why does he think that as a disciplinary counsel he can trump Congress on the rules of the game for attorney whistle-blowing?”

But Fox told Bloomberg BNA that the preemption issue was “a red herring.”

“We didn’t argue [that there was no] preemption,” Fox said. “There’s no case that has come down and said there is preemption, but I’m confident that if a court is ever faced with the issue, they will find preemption.”

“But that’s a red herring,” Fox added. “Because the issue is not whether there’s preemption—it’s whether these communications fell within the narrow exceptions that Sarbanes-Oxley creates to allow [whistle-blower] disclosures.”

And the answer to that question is “no,” Fox said.
Pretext

“Sarbanes-Oxley provides that certain disclosures may be made under certain circumstances,” Fox said. But the law’s whistle-blower protection provisions are “narrow” and don’t allow “universal disclosures.”

“They don’t allow [whistle-blowers] to make disclosures to the New York Times,” Fox said. “They don’t allow them to make disclosures to the Department of Justice. They don’t allow them to make disclosures to the government of Brazil.”

In any case, the record doesn’t support the notion that Koeck was engaged in bona fide whistle-blowing, Fox said.

“This was a person who was being fired for incompetence,” Fox said. “And in order to preserve her job, she said they’re firing me because I’m a whistle-blower.”

Fox said the board’s decision also “kind of skates over” an argument his office made in its briefs: that Sarbanes-Oxley and the D.C. Rules of Professional Conduct require in-house lawyers to report their employers’ violations “up the internal chain of command” before going to outside authorities.

“Assume for the moment [Koeck] had legitimate information that GE employees were engaged in some kind of serious misconduct,” Fox said. “Before she went to the SEC or otherwise blew the whistle, what I think she’s required to do is to go up the ladder—to go to the highest level of the corporation, which is the board of directors—and give the client the opportunity to fix the problem before you disclose the client’s confidences and secrets.”

That “reporting up” procedure finds support in both Sarbanes-Oxley and variants of ABA Model Rule 1.13, Fox said.

“And it is a way of harmonizing—to some extent, not completely—the conflicting goals of keeping client confidences and secrets while at the same time, under very extraordinary circumstances, blowing the whistle on the client in the limited [circumstances] you’re allowed to do so,” Fox said.
Settlement ‘Threat’

The ODC also charged Bernabei with engaging in conduct prejudicial to the administration of justice, in violation of Rule 8.4(d), when she allegedly tried to use GE’s confidential information to coerce the company to settle Koeck’s retaliation suit.

That charge was based on a statement Bernabei made to the lawyer representing GE in the retaliation case, which was an administrative proceeding before the Department of Labor. According to the board, Bernabei told that GE lawyer “that she had ‘marching orders’ from her client to go to the press if GE did not agree to mediation.”

The ODC said a “smaller defendant might succumb” if an “opposing counsel threatened to go public with embarrassing or detrimental attorney-client secrets,” and that the remark thus threatened to have an “adverse effect on the judicial process.”

The board was not convinced. “Ms. Bernabei never explicitly threatened to expose GE’s confidences, and the record indicates that her statement was literally true: If GE did not mediate, Ms. Koeck and Mr. Blakey intended to go to the press,” the board said.

The board said that although statements “such as that made by Ms. Bernabei do nothing to advance the legitimate interests of a client,” they do not rise to a violation of Rule 8.4(d).

Devine said that although he “wasn’t a fly on the wall” when Bernabei made the purportedly objectionable “threat,” the notion that her statement prejudiced the administration of justice was absurd.

“Lynne is a feisty, aggressive lawyer who is frequently in the professional equivalent of fisticuffs with opposing counsel,” said Devine. “But if that were grounds for disciplining an attorney, the professional landscape would be worse than after a black plague.”

But Fox said Bernabei’s comment had to be assessed in light of the circumstances.

“GE was winning the administrative case that Bernabei had brought,” Fox said, nothing that Koeck’s whistle-blower claim had been already been dismissed as untimely and hinged on an uphill appeal of that statute of limitations ruling.

“At that point GE had no incentive whatsoever to mediate or try to settle the case,” Fox said. “So faced with a losing hand, they pull out the threat to go to the press. And this threat to go to the press is on behalf of a former GE lawyer who knows GE’s confidences and secrets. So what I saw it as was a way of disrupting the normal litigation process to try to blackmail GE into entering settlement discussions.”

“It was very unfair to raise the specter of disclosing GE’s client confidences and secrets in order to try to coerce GE into entering settlement discussions in a case it was winning,” he said.

Harris, Wiltshire & Grannis LLP represented Bernabei. Fox represented his office.

To contact the reporter on this story: Samson Habte in Washington at shabte@bna.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bna.com

The Disciplinary Counsel has filed charges against prominent Washington whistleblower lawyer Lynne Bernabei and former Justice Department attorney Thomas Tamm.

The Disciplinary Counsel brought charges in June 2014 against Bernabei and Notre Dame Law Professor G. Robert Blakey — alleging that the two advised their client — former General Electric lawyer and whistleblower Adriana Koeck — to go public to reporters and law enforcement officials in the United States with incriminating and alleged confidential information against General Electric.

The case was initiated with a complaint filed by General Electric with the Disciplinary Counsel against Koeck.

In November 2015, Blakey was given the mildest possible sanction in the District — an admonition. The cases against Koeck and Bernabei are pending.

Last month, Tamm was charged with calling a reporter from a pay phone to make public the federal government’s program of illegal wiretapping.

Now, the whistleblower bar is organizing to push back at what they see as an ideological attack on whistleblower lawyers.

“We have rolled up our sleeves and we are organizing,”

Tom Devine of the Government Accountability Project told Corporate Crime Reporter in an interview last week.

“We are not going to be passive.”

“These whistleblowers were acting within the legal rights Congress created with the whistleblower statutes,” Devine said.

“In the Tamm case, the government didn’t even attempt to charge him with misconduct. His activities were legally protected.

In the Bernabei case, the Department of Labor rejected the same charges when General Electric tried to censor Ms. Bernabei’s advocacy for the whistleblower in government proceedings.

This is an attack by the DC Bar Counsel on the constitutional authority of Congress and the President to enact the rules of law and for judicial bodies to enforce them.

The Bar Counsel is saying that its standards trump and can cancel out the free speech rules that our government has enacted to protect the public against bureaucratic misconduct.”

Former Justice Department official and whistleblower lawyer Jesselyn Radack told Corporate Crime Reporter that

the Disciplinary Counsel “has a nasty history of politically-motivated bar discipline, especially against whistleblowers and attorneys for whistleblowers.”

“Like Thomas Tamm, I blew the whistle as a Justice Department attorney,” Radack said.

“As with Tamm, the federal criminal case against me closed with no charges ever being brought. Afterwards, we both faced charges from the Maryland Bar, which were dismissed in a timely fashion.

However, in my case, the DC Bar charges hung like a Sword of Damocles over my head for ten years.

We see the exact same pattern with Tamm.

The DC Bar is bringing charges 12 years after his revelation of the government’s unconstitutional and illegal warrantless wiretapping program.”

“If Tamm or I were threats to the public, the Bar would obviously want to pull our licenses as soon as possible — instead, they have taken it upon themselves to act as a retaliatory tool of the Justice Department.”

Washington University Law Professor Kathleen Clark said that

“Tamm’s disclosure of the surveillance program to a Capitol Hill staffer and to the New York Times appears to be a quintessential public interest disclosure.”

“Tamm — and others within the Office of Intelligence and Policy Review (OIPR) — believed that the program was illegal,” Clark said.

“Officials at the highest levels of the Justice Department had nonetheless purported to authorize it. Tamm spoke with supervisory lawyers within OIPR about it, and they apparently confirmed its illegality but weren’t doing anything about that illegality.”

“After the New York Times published articles about the program, members of Congress were up in arms about it. Eventually, Attorney General Holder acknowledged that the program was illegal.”

“It seems strange that DC’s Disciplinary Counsel would bring these charges against Thomas Tamm for his critical role in the disclosure of an illegal government surveillance program. It’s even more strange that they decided to do this more than seven years after Tamm’s role was made public.”

Whistleblower lawyer Jason Zuckerman told Corporate Crime Reporter that

“as a whistleblower advocate, I am concerned about what appears to be an ideological crusade against whistleblowers and their counsel.”

“The ostensible mission of Bar Counsel is to ‘protect the public and the courts from unethical conduct by members of the D.C. Bar,’” Zuckerman said.

“But despite limited resources and a backlog resulting from receiving approximately hundreds of complaints a year, the highest priority of Bar Counsel appears to be prosecuting whistleblowers and their attorneys.”

“In the Tamm matter, the conduct occurred in 2004 and in the Bernabei matter, the conduct took place in 2008.

And even though the disciplinary process in DC is complaint driven, Bar Counsel chose to prosecute Bernabei without having received any complaint about her conduct in that matter.

It seems very suspicious that Bar Counsel is devoting such significant resources to prosecuting Bernabei and Tamm, especially where the alleged conduct appears to fall into a gray area, if there was any violation at all, which makes it very difficult for Bar Counsel to prove by clear and convincing evidence that Bernabei and Tamm knowingly violated the Rules of Professional Conduct.”

“There seems to be a double standard.

Has Bar Counsel ever prosecuted any attorneys at corporate firms that help their clients perpetrate fraud?

And did Bar Counsel investigate prominent lawyer executives at Fannie Mae who appear to have engaged in actions that led to a multi-billion dollar restatement and left taxpayers footing the bill?

Did Bar Counsel prosecute the attorneys that enabled large banks to nearly tank the economy?

And has Bar Counsel prosecuted government attorneys that enabled torture and other flagrant unlawful human rights violations?

Does Bar Counsel protect the public or does it protect the interests of big corporations and big government?”

“About one week ago, 60 Minutes aired a show in which they caught lawyers, including a former American Bar Association president, providing advice on how to move suspect money into the United States,” Zuckerman said.

“Is it Bar Counsel’s position that lawyers that take steps to combat or oppose fraud should be disbarred and that lawyers that enable corporate fraud are the pinnacle of the profession?

I resent that my mandatory bar dues are used to fund an office that is zealously prosecuting corporate and government whistleblowers while apparently ignoring a serious problem in the legal profession of attorneys perpetrating and enabling massive frauds.”

“What is especially odd in the Bernabei matter is that Bar Counsel is taking positions that are contrary to federal law and Supreme Court precedent.

Several federal courts and indeed the Supreme Court in Lawson v. FMR have held that attorneys can bring Sarbanes-Oxley claims when they suffer retaliation for blowing the whistle.

Yet in the Bernabei matter, Bar Counsel appears to claim that federal law does not preempt inconsistent state rules of professional conduct. Advancing this bizarre legal argument is an odd use of Bar Counsel’s limited resources.”

At the center of the storm is Assistant Disciplinary Counsel Hamilton P. Fox III, who is bringing the charges against Bernabei and Tamm.

Fox is a former partner at Sutherland Asbill. He currently teaches a course at Georgetown Law Center titled “Counseling the Corporation in Crisis.”

While at Sutherland Asbill, Fox represented the Israeli spy Jonathan Pollard. And a couple of years ago, he settled a high-profile run in he had with DC police over a parking dispute. Fox says DC wrote him a check for $80,000 to settle the dispute.

Fox told Corporate Crime Reporter that there is no ideological crusade against whistleblowers.

Fox said that out of the thousands of cases investigated over the past ten years by his office, he knows of only two brought against whistleblower lawyers — the Bernabei cases and the Tamm case.

Fox says that there have been many more brought against corporate lawyers.

“I can think of at least three lawyers in major law firms whom we have disciplined in recent years,” Fox said.

“And it’s simplistic to say that we are trying to trump federal law,” Fox said. “Federal law does not give lawyers the right to violate attorney-client privilege. If you hired a lawyer and disclosed to him something very bad that you have done, do you want that lawyer to be free to disclose to the public?”

Fox said that his office gets about 500 to 600 complaints about lawyers every year.

“If you go back ten years, that’s about what — 5,000 complaints?” Fox said. “And so far, we have brought two cases against whistleblower lawyers?”

“How is that a crusade?” he asked.

Fox says that if a lawyer hears from a client about activity that poses immediate risk to human health, then they would have a duty to report that to law enforcement and go public with it.

“But that’s different from the kinds of corporate wrongdoing — like misleading advertising — it depends on what the misconduct is,” Fox said.

“If the lawyer hears — I’m going to shoot my wife, you can disclose,” Fox said. “If the lawyer hears — I’m going to divorce my wife, you can’t.”

What about rampant corporate bribery?

“I actually had such a case when I was in practice,” Fox said.

“I found out that agents of my client company were bribing people in a foreign country to get licenses.

If I have actual knowledge of that, under rules of professional conduct, I’m required to report that up the chain within the company, to the board and to give them the opportunity to correct.

If they do not correct it, then I am allowed to report it outside the company, only if to prevent the client from committing the crime or fraud and if it is reasonably certain that substantial financial injury will occur to someone else.

If it is simply that some government official in some foreign country is being enriched, I cannot report it.”

“That’s the premise of our profession,” Fox said. “We withhold the secrets of our clients.”

Sarbanes-Oxley imposed a different standard, Fox admits — “probably under SOX I report to the SEC — but overall — this area of law has not yet been settled.”

Disciplinary enforcers like Fox don’t have prosecutorial discretion and thus can’t launch vendettas, he says. Every case he brings has to be approved by a superior. But he admits that in most cases, his recommendations are approved.

Devine counters that the DC Disciplinary Counsel has “gone rogue”

“The DC Bar Counsel has gone rogue in a back door attack on the rule of law as established by our Constitution,” Devine said.

“It is also ignoring federal pre-emption. Prior DC Bar Counsel opinions had respected preemption and said they could trump its internal bar rules.”